Panama`s Economy Better Than Feared

PANAMA CITY — Panamanians are confident that last month`s U.S. troop invasion set the stage for a better way of life for most people here.

However, that very optimism could prove a bigger threat to the new government of President Guillermo Endara than the economic problems he has identified as his top priority.

``Expectations are very high-too high, I fear,`` said Bruno Bemporad, general manager of Panabank, a Panamanian bank. ``If this government does not receive at least $1 billion in the next month, then it could have many problems, because expectations are higher than reality.``

The Endara government says it needs $1.5 billion in U.S. aid overall to help put the country back together again. On Sunday Endara said he had asked for nearly $1 billion to repair damage caused by the U.S. invasion: $700 million to help rebuild looted businesses; $35 million to rebuild the Chorrillo neighborhood, which bore the brunt of the invasion; and $200 million for a two-year project to provide work to people who lost their jobs.

The U.S. has not said how much, if any, aid it will offer.

Some U.S. officials have tried to dampen Panamanian expectations, but the new U.S. ambassador to Panama, Deane Hinton, offered a strong hint that the U.S. will provide substantial assistance.

``I personally am confident that we will make a significant contribution to the economic rehabilitation of Panama,`` he said Saturday.

Many Panamanian businessmen say that Panama, Central America`s wealthiest nation, does not need as much assistance as the government has asked for.

``It`s going to take a lot less money than people think,`` said Fernando Nunez Fabrega, a Panamanian businessman. ``All you need to do is create a climate of confidence and money will flood in here, because the rest of Central America is basically an economic disaster zone.``

That is why Fabrega, along with many economists, believes economic aid is a question more of political than of economic necessity.

Bankers are eager to start lending money again. Lawyers believe rich foreigners will again seek tax shelters here. Refugees expect to receive new homes that are better than the ones they lost during the invasion. Even prostitutes are hoping that restrictions preventing U.S. soldiers from visiting downtown will be lifted now that the U.S. again has friendly relations with the government.

The other reason for high hopes is that things really aren`t all that bad. Despite the sanctions and the destruction caused by the Dec. 20 U.S. invasion, Panama`s economy is in surprisingly good shape, economists say.

The sanctions certainly took a heavy toll: The gross national product fell 20 percent, unemployment climbed to 23 percent and $25 billion in capital fled the Panamanian banking system.

But Panama withstood the sanctions remarkably well. Indeed, had it not, the sanctions might have achieved their aim of dislodging strongman Manuel Antonio Noriega, and the invasion would have been unnecessary.

``How Noriega did it is a big mystery to us economists,`` said Bemporad.

``GNP was falling and many people were without jobs, but everyone was eating and having fun. I don`t think we will ever fully explain it.``

One explanation lies in Panama`s relative economic health. Its per capita income is at least twice that of many of its Central American neighbors.

Unlike many Third World countries, Panama has a sizable and well-off middle class. The Mercedes-Benzes and BMWs parked in driveways throughout the city are testimony to the continued ability of Panamanians to make money despite the problems they have faced.

Even the poorest neighborhoods, where families cram into tiny one-room dwellings, have indoor plumbing and electricity. The living conditions of Panama`s poor would be considered deplorable in the U.S., but they compare favorably to those in many Third World nations.

Therein lies another clue to the hardiness of Panama`s economy. Two decades of military rule and official corruption encouraged a thriving black market that made it possible for even the poorest Panamanians to afford at least some luxuries.

In Panama City, corruption reached such levels that it became impossible for store owners to compete without doing something illegal to cut their costs, according to Rodrigo Rives, a shipping attorney.

``It became a way of life,`` he said. ``It was amazing. You could go to the stores and the prices would be lower than they were in the factory.``

Rives predicts an immediate jump in the cost of living as a result of the U.S.-supervised reforms being undertaken by the Endara government, a prospect that alarms many Panamanians.

``What is the government going to do about the poor?`` asked Bemporad.

``They think things are going to get better, but they will probably be very disappointed.``